US wind manufacturing makes a comeback thanks to Inflation Reduction Act

Canary Media thanks KORE Power for its support of our special series on clean energy manufacturing.

Lee County sits at the southeasternmost point of Iowa, wedged between Missouri and Illinois and bordering the Mississippi River. About one in four jobs in this rural county of 33,000 people is in manufacturing, with workers producing everything from canned sausages, chewing-gum sweetener and popcorn tins to fertilizer, printer ink and weather strips for car doors. Until last year, Lee County also made the swooping 200-foot-long blades that spin atop wind turbines.

Wind power is the largest source of U.S. renewable electricity generation, providing over 10 percent of the country’s total electricity every year — up from just 3.5 percent a decade ago. In recent years, however, the development of new wind farms has significantly slowed, weakening demand for giant blades and towers and a litany of smaller components.

In June 2022, Siemens Gamesa, one of the world’s top wind turbine manufacturers, put its Lee County facility into ​“hibernation,” leaving 171 people without work. Another 92 employees lost their jobs at a facility in Hutchinson, Kansas, where Siemens Gamesa made the nacelles that sit on turbine towers and hold mechanical components. The company cited the ​“current challenges in the U.S. onshore wind market” in making its decision to stop production at both sites.

Dennis Fraise likened the Iowa layoffs to ​“the air running out of a balloon — that’s what it feels like to the community and the region.”

Fraise is the CEO of the Lee County Economic Development Group, a public-private partnership. He said that, when the blade plant stopped running in the city of Fort Madison, the local businesses that supplied uniforms, provided food services and performed maintenance work also felt the blow. Lee County’s population has been steadily shrinking since the 1970s as residents move to nearby cities and seek jobs in other sectors.

“Anytime a plant has a disruption, it has an impact on our whole economy,” he told Canary Media. ​“It’s still a great place to live,” he added, ​“but it’s deflating.”

Now, however, the downturn facing the U.S. wind industry is beginning to reverse itself, thanks in large part to the Inflation Reduction Act, which President Joe Biden signed into law last August. The sweeping legislation dedicates at least $390 billion over 10 years to accelerate investments in projects that reduce greenhouse gas emissions and tackle climate change. The law is expected to significantly boost deployments of wind, solar and battery-storage systems while also creating and expanding supply chains to make those clean-energy technologies at home.

For solar panels and batteries, that will largely entail building new U.S. factories, given that the technologies today are overwhelmingly produced in Asia. But for onshore wind, the federal policy is expected to breathe new life into a long-established but shrinking supply chain. Blade production in particular has declined precipitously in recent years, owing not just to waning demand but also to growing financial pressures that have pushed companies to make their blades in countries with lower labor costs.

Onshore wind is ​“going through its second renaissance as we see demand ramp back up and manufacturing establish itself even firmer domestically,” said John Hensley, the vice president of research and analytics at the American Clean Power Association trade group. Meanwhile, the country’s fledgling offshore wind sector is building its domestic supply chain virtually from scratch.

The U.S. climate law is taking effect just as the rising inflation and commodity prices that have battered wind developers and manufacturers around the world are finally starting to ease. That should reduce the costs of producing the towers, blades, nacelles, rotors and other components used to harness wind on land and at sea and generate clean electricity. Such tailwinds are injecting fresh momentum into the U.S. wind industry.

Earlier this year, Siemens Gamesa resumed operations in Iowa and Kansas and is now working to return the facilities to full production, a company representative said. The Lee County plant will also start making 266-foot-long blades for the manufacturer’s newest high-capacity-factor turbines. The Spanish-German company has separately proposed to make nacelles for giant offshore turbines in Port of Coeymans, New York to serve the state’s burgeoning offshore wind industry.

Two GE subsidiaries announced plans to manufacture offshore wind parts in coastal New York. And six other companies are developing or expanding onshore wind manufacturing facilities across the country, including a wind-tower production facility in Belen, New Mexico. Arcosa Wind Towers, the manufacturer, said it plans to invest up to $60 million and add around 250 jobs to supply major wind farms in the Southwest.

In April, Chinese firm CS Wind broke ground on a massive expansion project in Pueblo, Colorado. The turbine factory, which was previously owned by Denmark-based Vestas, has seen its own cycles of layoffs and rehiring since it opened in 2009. Now the facility is expected to become the world’s largest plant for wind towers and create at least 850 jobs when finished in 2028.

The history of U.S. wind is marked by peaks and valleys 

America’s first large-scale wind farms were installed in California in the early 1980s. But it wasn’t until Congress created a key federal program in 1992 that the modern industry truly took off.

The production tax credit (PTC) gives a couple of cents to operators of renewable-energy systems for every kilowatt-hour of electricity the facilities produce during the first decade of operation. Wind developers and industry advocates say the PTC historically has allowed wind projects to compete with subsidized incumbent energy sources such as coal and fossil gas — while also supporting domestic production of wind-turbine components, including not just towers and blades but also gearboxes, power cables, motors and heavy-duty bolts.

But the PTC isn’t permanent; every so often, federal policymakers have let it lapse. In 2012, wind companies rushed to take advantage of the tax credit before it expired at the end of the year, leading to a spike in new installations, followed by a swift drop-off. Turbine and component makers shuttered factories and cut thousands of jobs in the wake of waning demand. Congress later renewed the PTC, and U.S. wind farms proliferated once again.

That is, until the start of this decade — when the PTC was in danger of expiring again.

“There’s a very sharp correlation between tax credits and wind power installations,” said Atin Jain, a senior wind power associate for BloombergNEF, a clean energy research firm. He noted that project developers ​“cannot really make a decent return without it.”

It certainly didn’t help that, as companies fretted about the PTC’s looming end, the rest of the global economy was going haywire. Supply-chain issues caused or exacerbated by the Covid-19 pandemic made it harder and more expensive to find components. Prices increased significantly for commodities such as steel, which is used in turbine towers, as well as the chromium, copper, manganese, nickel and other metals used in the gearbox and generators.

After years of steadily getting cheaper, wind turbines were becoming more expensive. Turbine prices had fallen from $1,800 per kilowatt in 2008 to $770 to $850 per kilowatt in 2021. But over the last two years, the average per-megawatt cost of a wind turbine increased by 38 percent, data from GlobalData shows. Turbines account for roughly half of the total cost of a wind farm.

All of that uncertainty made it difficult for manufacturers to justify churning out more turbine components for a shrinking number of customers. Blades in particular are labor-intensive to make, requiring workers to, among other tasks, manually lay out fabric fibers and apply composite resins, which give blades durable shells that can endure decades of high wind speeds, extreme weather, and bird and bat strikes.

For manufacturers, ​“Having a predictable flow of materials and components, and understanding when there’s going to be demand, is a challenge,” said Aubryn Cooperman, a wind energy analyst for the U.S. National Renewable Energy Laboratory.

“If a [wind farm] gets delayed by a year or two, then the supplier is in a difficult position,” she added. ​“They can’t just tell their workers to go home for a year and then come back later.” It’s also hard to store backlogs of blades that stretch hundreds of feet.

Instead, facilities tend to shut down and cut jobs. In 2021, after years of expansion, the supply chain for the domestic wind industry contracted, according to the laboratory’s 2022 Land-Based Wind Market Report.

Even before Siemens Gamesa pressed pause at its facilities in Iowa and Kansas, the nation’s blade manufacturing capability had plummeted by 50 percent, from roughly 9 gigawatts in annual capacity in 2020 to 4.6 gigawatts in 2021. Blade and component facilities closed or idled in places including Little Rock, Arkansas; Newton, Iowa; and Aberdeen, South Dakota. Nacelle assembly capability declined by 18 percent in 2021, while tower manufacturing capability fell modestly as well.

In the report, researchers cite competition from foreign suppliers, rising transportation costs and uncertain project deployment as ​“conspiring to weaken” the country’s capacity for making onshore turbines. Gnawing market uncertainty also kept manufacturers from upgrading their facilities to be able to produce the increasingly larger turbines that wind developers now prefer.

New incentives offer ​“breathing space” instead of tight deadlines 

It was during this particularly dire moment for U.S. wind that Congress passed and Biden signed the Inflation Reduction Act last year. Cooperman said the climate law sent a ​“clear demand signal” that developers and manufacturers had long been seeking.

The effect was virtually immediate, with companies moving swiftly to order more turbines and dust off their dormant factories. Although it may still take years for those turbines to move off the production line and start spinning and producing power, experts now expect the overall U.S. wind power market to nearly double in size by 2030.

Today, the United States has over 141 gigawatts of total installed wind capacity, only a sliver of which — 0.04 gigawatts — is built in the water. Between 2023 and 2030, the industry is expected to add 111 gigawatts of onshore wind capacity and 26 gigawatts of offshore wind capacity, BloombergNEF analysts predict.

“A lot of projects that were put on the back burner a few years ago have seen a renewed interest by the developers,” Jain said. ​“Manufacturers that were thinking twice about the U.S. market…are now putting more resources into their facilities.”

Notably for wind companies, the IRA extends the production tax credit — now worth 2.75 cents per kilowatt-hour — through 2023 and 2024. Alternatively, project developers can take advantage of the Investment Tax Credit, which gives upfront tax breaks worth 30 percent of total project costs and was also extended through the end of next year. Both programs are now linked to wage and apprenticeship criteria.

However, wind farms placed in service on or after January 1, 2025 will be eligible for different incentives. Starting that year, the IRA will replace the existing PTC and ITC with provisions that apply to any electricity-generation facility that has an ​“anticipated greenhouse gas emissions rate of zero.”

The Clean Electricity PTC offers a base credit of 2.75 cents per kilowatt-hour for projects of less than 1 megawatt in capacity and half a cent per kWh for projects above that size. The Clean Electricity ITC will cover 30 percent of project costs for smaller installations and 6 percent of costs for larger projects. Bonus credits are available for clean-energy systems that include U.S. manufactured products and are sited in low-income communities or otherwise disadvantaged areas.

At the same time, companies that make the turbine parts, solar panels and batteries that power these projects are eligible for a slew of incentives all their own — including the Advanced Manufacturing Production Credit (45X).

Unlike the on-again, off-again PTC, the new incentives ​“provide a lot more breathing space for the wind power sector to further localize the supply chain and keep innovating so that the costs keep coming down,” Jain said. ​“Then costs could be at a level where you don’t need to depend on subsidies in general.”

Yet even as the U.S. wind market begins to stabilize, plenty of other hurdles remain before the industry can carpet the nation’s fields, mountaintops and oceans with exponentially more turbines.

The nation is in desperate need of high-voltage power lines that can connect wind, solar and other renewable-energy sources to the electricity grid. The transmission shortfall is already leading to lengthy backlogs and rising grid-upgrade costs for developers. In some communities, opposition from local residents, environmentalists and fossil-fuel interest groups is further complicating efforts to add utility-scale projects.

Meanwhile, the offshore wind sector is facing its own unique set of challenges as it sets about establishing a domestic supply chain from the ground up; building fleets of specialized ships that carry workers and turbines out to sea; and developing novel floating technologies to support turbines in more difficult geographies, including off the U.S. Pacific Coast.

Back in Lee County, Iowa, as Siemens Gamesa gears up to resume production at its blade facility, residents are still watching to see whether the surge in federal funding and renewed market demand can finally break the boom-bust nature of wind manufacturing in their community. Before pausing production last July, the company had already cut hundreds of jobs in 2018 and then again in 2020.

Dennis Fraise, of the county’s economic development group, said that Siemens Gamesa has been ​“a great employer” in the region and that he was glad to see the plant reopen and begin bringing workers back.

Still, he added, ​“There’s always a little trepidation because it has been a cyclical business.”

Headquartered in Coeur d’Alene, Idaho with clients on every continent, KORE Power provides functional solutions to meet the growing demand for green economic expansion and a decarbonized future. As a fully integrated provider of battery cells and clean energy technology and solutions, KORE drives the energy transition through direct access to superior tech, clean energy manufacturing, and unmatched support for clean energy jobs and resilient, sustainable communities worldwide. KORE Power’s robust portfolio provides the commercial, industrial, utility and defense markets with next-generation battery cells, advanced energy storage systems that scale to grid+, intuitive asset management, and EV power and charging infrastructure support.